Finance sector

Supporting low-carbon investments

Financial institutions and investors have a critical role in driving the world towards a low-carbon economy.

WWF is working with financial institutions to develop more appropriate financing packages for renewable energy projects and technologies.

Already financial institutions have implemented strategies to switch their investments to a much lower carbon intensity portfolio, and have begun to review how companies plan for the impacts of climate policy on their core business.

The benefit for investors

From an investor's perspective, the question of how prepared companies are for the shift to a world in which carbon emissions become costly is crucial. Companies that do not take these new policies into account are more likely to make erroneous decisions and reduce returns to investors.

Investing in a new coal power station, for example, would assume that penalties for carbon dioxide (CO2) emissions will stay low and that other, less carbon-intensive fuels (e.g. gas, renewables) will not become profitable alternatives. However, climate policy is now increasing the cost burden of CO2 emissions and, hence, the cost of fossil fuel-based power generation.

Investors need to be aware of how the companies in which they invest are facing up to this new challenge, and engage with them to ensure that they are making sufficient allowance for the cost of carbon.

Reports

Electricity companies face financial risk from climate change

A WWF report Power Switch: Impacts of Climate Policy on the Power Sector concludes that electricity utilities can cheaply reduce large quantities of emissions, but it depends to a great extent on the willingness of firms to switch to low carbon strategies. Investors and analysts therefore need to engage with utilities at the earliest opportunity to ensure that low-carbon investment strategies are in place.

WWF teams up with financial industry to tackle climate change

The financial industry needs to systematically screen climate change risks, according to a report Climate Change & the Financial Sector: An Agenda for Action by the Allianz Group and WWF. The report outlines specific steps for actions to better integrate risks from climate change into the insurance, banking, and asset management sectors.